Economic Systems and the American Free Enterprise System

Vocabulary practice flashcards covering traditional, command, market, and mixed economic systems, transition policies, key characteristics of free markets, and the roles of government and consumers.

Traditional Economy

An economic system where decisions are determined primarily by customs and traditions, offering stability and predictability but leading to limited economic growth and lower productivity.

Command Economy

An economic system in which the central government decides what, how, and for whom to produce, relying on state ownership and central planning rather than market competition.

Market Economy

An economic system where consumers and producers make decentralized decisions through supply, demand, and prices, characterized by private property and profit incentives.

Mixed Economy

An economic system that combines market forces with government intervention, regulations, social programs, and public goods to address market failures.

Deng Xiaoping

The leader under whom China introduced market-oriented reforms beginning in the late 1970s, leading to rapid economic growth and poverty reduction alongside challenges like income inequality and continued state control.

Competition

The effort of businesses competing for customers and profits, which encourages innovation, puts downward pressure on prices, and provides consumer choice.

Private Property

A major characteristic of a capitalist economy where individuals and businesses can own property and resources, creating incentives to care for, improve, and invest in them.

Economic Freedom

A characteristic of a free market economy where consumers and producers are generally free to make their own economic choices and decisions.

Voluntary Exchange

The act of buyers and sellers freely and willingly engaging in market transactions when both parties believe they will benefit from the exchange.

Profit Motive

The desire of individuals and businesses to earn profit, which encourages them to produce goods and services and take economic risks.

Consumers

Major players in the free enterprise system who purchase goods and services, provide businesses with revenue, and influence production through their spending.

Businesses/Producers

Major players in the free enterprise system who produce goods and services, hire workers, invest resources, compete for customers, and seek profits.

Protector (Role of Government)

A role of government in a capitalist economy focused on enforcing laws to protect consumers, workers, property rights, and contracts.

Provider (Role of Government)

A role of government that supplies public goods and services not adequately provided by private businesses, such as roads, national defense, public education, and parks.

Regulator (Role of Government)

A role of government that establishes rules for business and economic activity, including environmental regulations, food safety rules, minimum wage laws, and antitrust laws.

Consumer (Role of Government)

A role of government where the government itself purchases goods and services from private businesses, such as military equipment, computers, and construction services.

Consumer Sovereignty

The concept that consumers hold ultimate power in a market economy because their purchasing decisions determine what goods and services businesses produce.